Showing posts with label land tax. Show all posts
Showing posts with label land tax. Show all posts

Friday, June 16, 2017

Queensland Budget taxes absentee land owners

The Queensland Government’s 2017-18 budget announced a number of key tax changes relevant to Queensland property investors.

New land tax surcharge for “absentee land owners” from 1 July 2017

  • A new 1.5% land tax surcharge is being introduced for “absentee” land owners with land holdings valued at $350,000 or more. 
  • Absentee land owners are already subject to higher rates of land tax (and lower land value thresholds) when compared with individual tax payers. Draft legislation released this week indicates the Government intends the new 1.5% surcharge to be introduced as an increase to the existing rates without any expansion of the existing concept of who is an “absentee” for land tax purposes.
  • The new surcharge rates will apply to land tax assessments issued on and after 1 July 2017, which will be based on a person’s Queensland landholdings as at midnight on 30 June 2017.  As a result, there is limited time to make any changes to property ownership arrangements before the new rules take effect.
No increase to Foreign Acquirer Transfer Duty Surcharge, but certain changes proposed to its application

In 2016, the Queensland State Government introduced an additional foreign acquirer duty surcharge (AFAD) which applies to transactions involving interests in what is called “AFAD residential land”.

In a welcome development, no changes have been announced to the existing Foreign Acquirer Transfer Duty Surcharge. The surcharge rate will stay at 3% (which is significantly less than the 8% and 7% surcharge rate that applies in New South Wales and Victoria, respectively).

However, the draft legislation proposes some additional changes to the operation of AFAD in Queensland.
·         The draft legislation expands the meaning of AFAD residential land to include “chattels” in Queensland which “can be directly linked to, or is incidental to, the use and occupation of the land”.  Currently, only residential land and not chattels attract the surcharge rate of duty.  The move to include chattels in the surcharge duty base is a response to Government concern about the way in which value can be allocated between land and chattels.  The changes remove any incentive for value shifting.
·         The draft legislation will expand the application of AFAD to certain agency transactions affecting AFAD residential land.  Currently, the agency provisions in the Qld Duties Act permit a foreign principal to avoid AFAD by using a non-foreign agent to enter into an agreement for transfer (i.e., when duty is originally assessed).  The proposed amendments effectively mean that, where a principal is a foreign person at the time the relevant transfer of AFAD residential land occurs, the agreement will need to be reassessed as if AFAD applied to the agreement. 
·         The draft legislation also proposes removing the ability of foreign companies (pre-incorporation) to acquire AFAD residential land without incurring an AFAD liability through the use of an Australian entity to enter into an initial agreement for the transfer of land prior to the foreign company’s registration.  Currently under the Qld Duties Act, the initial agreement for the transfer would not attract AFAD and the subsequent transfer to the foreign company (post-incorporation) would be exempt.  The proposed amendments will require such an agreement to be reassessed as if AFAD applies and the subsequent transfer will not be exempt unless the duty (including AFAD) has been paid.

Sunday, August 5, 2012

Uncertainties, Risks and Body Corporate Fees

I feel that now is probably a good time to buy an apartment in Brisbane.  Prices are down, and there are many good apartments for sale.  However, there are uncertainties that are holding me back:
  • What will happen if the mining boom comes to an end?
  • Will Newman's retrenchment of 20% of the public service kill any chance of growth for the next 3 years?
  • Will Newman increase land tax rates and lower land tax threasolds in Queensland?
  • What will Newman and the Attorney-General do in relation to the complex issues regarding lot adjustments (that impact the percentage of body corporate fees an individual unit owner will pay)?  If I buy now, will the unit entitlements be adjusted up in the near future so that my body corporate fees will increase?  Will there be costly legal action between the body corporate and various interest groups in the buildings.  See here and here for example.  Changes to this are a priority for the government it seems, to reward penthouse owners for voting for the Liberal party.
So, for the time being, there is too much uncertainty and risk to buy an apartment (or an investment property) in Brisbane or Queensland.

Regardless, body corporate fees and council rates are becoming prohibitively high, and make investing in apartments less attractive.

I looked at an older apartment on the river recently.  It has been on the market for more than 6 months.  It is a 2 bedroom (with a small second bedroom), with river views.  The facilities are moderate -- no doorman, onsite manager, reception desk or the like.  The list price has come down, and is now $455,000.  But the body corporate fees are $8,830 a year, and council rates are $2,000 a year.  So more than $10,000 a year in these expenses.  The rent for this apartment would be about $400 a week, or about $365 a week after real estate agent's fees.  So that is 30 weeks, or more than half a year's rent, just to cover body corporate levies and rates!  Clearly, this is not a good investment, even if the price drops another $100,000.

Post-script -- comment from a reader after this post was published:
Your sentiments re purchasing a unit or apartment in Brisbane reflect my own also, very valid points.
Another is upcoming or planned or approved “future” capital works such as painting, under-pinning, structural repairs, landscaping, tree removals and the like. At a number of units I have looked at, the agents got very cagy when put the question. Pressing one very hard got I wind of a complete paint job coming up within 2 years,  approx $250,000k across 80 units, and unit titles re-appropriation may also make some owners rather unhappy as well. Ouch! Another had $30,000K in quotes not yet voted on (but very necessary since drains were becoming repeatedly blocked by roots) for tree removal. Ouch!  Many units 10 years and over now need a lot of work, much of which has been delayed or put back but  it’s coming. New buyers beware.
Article in AFR, 7 August, P38: Newman at a get together of banks and bizo’s was playing pretend Reserve Bank Chief and instructing banks to start lending. Banks won’t (as we all know), denying they should take risks just for Newman et al. Last para of article states : At a meeting of people from the big four banks recently, one person from one of the big four proclaimed  “We’re not lending anything into Northern Australia. Northern Australia begins at Nundah in Brisbane.”

Friday, June 15, 2012

Newman Targets Property Owners for Tax Increases


Any further financial imposts on property investors is likely to see them pull up stumps and sell their rental properties, according to the Real Estate Institute of Queensland (REIQ).

The release of today’s audit on the Queensland Government’s finances shows property owners, and investors in particular, have once again been earmarked to financially salvage the State’s fiscal woes.  The audit has outlined potential revenue-raising measures including: imposing a $100 levy on all property owners; reducing or removing the concession on land tax; applying a premium transfer duty rate; and increasing the landholder acquisition duty rate.

Acting REIQ CEO Antonia Mercorella said property owners were sick and tired of having to bail out the government.  ‘‘Property owners - and investors specifically - seem to forever be targeted by all levels of government when they are short of cash, whether it is through higher council rates, one-off levies or higher rates of stamp duty,’’ she said.  ‘‘The additional legislative and compliance obligations on property investors over recent years, coupled with weaker returns on investment, has resulted in many opting to sell their rental properties.’’

Australian Bureau of Statistics (ABS) data shows the number of investors active in the Queensland property market has halved in the last five years.  Ms Mercorella said this number was likely to decline even further if investors were slugged with additional costs.
“We are currently starting to see the impact of this reduced investor activity with vacancy rates tightening and rents increasing across the State. If more investors left the rental market, then this situation would undoubtedly worsen,” she said.  “If land tax thresholds are reduced or removed, the added costs would put an end to the glimmers of renewed investor activity we have seen in recent months and would also likely be passed onto tenants via increased rents.  Also the unit and townhouse market in particular is yet to see investors return significantly with the additional costs associated with this type of housing deterring investors.”

Newman was unfriendly to property owners as Mayor of Brisbane -- he substantially increased rates for apartment owners, and did nothing to reduce spending by Council or the number of council administration workers.